State-owned Saudi Aramco is in preliminary discussions with Indian Oil Corp. (IOC), India’s top refiner, on downstream investments, Reuters reported, citing IOC chairman B. Ashok.
The investments could include a 1.2 million barrels per day (bpd) refinery to petrochemical mega project in India’s west coast, it was reported.
“They are interested in projects and we have just started (talks)...It's very, very preliminary discussions,” Ashok said, when asked if his company is in talks with the Saudi oil giant on the west coast project.
IOC is looking to invest about $30 billion in five years, most of which will be spent on fuel upgradation projects and petrochemicals, Ashok said.
The Indian refiner and its partners are expected to arrive at a final investment decision on the west coast project by the end of next year, or early 2019.
The project, which also includes an ethylene unit with a 3 million tonnes/year capacity, would then take five years to complete, Ashok said.
Aramco is looking to strengthen its international portfolio through downstream investments, in order to secure market share for its crude oil ahead of its initial public offering (IPO) in 2018, expected to be the world’s largest
The oil giant has ramped up its investments in Asia, its biggest regional market, under the strategy, amid rising output from US shale producers.
In February this year, Aramco agreed to buy an equity stake worth $7 billion in an oil refinery to be built by state-run Malaysian energy firm Petronas.
Aramco will supply up to 70 percent of the crude feedstock for the project, giving the world’s top oil producer a key market for its crude in Asia.
The Saudi oil company also signed a $6 billion deal with Indonesia’s PT Pertamina last December to speed up the upgrade of the Cilacap refinery in central Java. The project is expected to start up in 2021, and will be 45 percent owned by Aramco.
Earlier in May, Aramco also cut pricing for June oil exports to Asia, amid tough competition for market share with rival producers Iran and Iraq.
India's top refiner said it is in initial talks with Saudi Aramco on downstream investments, including a mega project on its west coast, that could help the OPEC member lock-in customers amid an oil supply glut.
Oil producers are targeting growing demand in Asia to boost market share after rising U.S. shale oil output has displaced some of their supplies.
India, the world's third biggest oil consumer, plans to build a 1.2 million barrels per day (bpd) refinery to petrochemical project in the country's west coast to feed its growing fuel demand.
The International Energy Agency estimates India's refining capacity, the fourth biggest in the world, would lag local fuel demand going forward, requiring investment in more plants.
"They are interested in projects and we have just started (talks)...It's very, very preliminary discussions." B. Ashok, chairman of Indian Oil Corp told reporters when asked if his firm is in talks with Aramco on the west coast project.
Saudi Arabia's Energy Minister Khalid Al Falih earlier said that Aramco continues to explore a variety of promising collaboration opportunities across the ASEAN region and elsewhere in Asia, with India being a prime target.
IOC plans to invest about $30 billion in five years with the bulk of that meant for fuel upgradation projects and petrochemicals, Ashok told reporters on the sidelines of the Asian Oil and Gas conference.
India plans a nation-wide use of Euro VI compliant fuels from April 2020.
IOC and its partners are expected to make a final investment decision on the west coast project in end-2018 to early 2019. The project, which includes a 3 million tonnes/year ethylene unit, would then take five years to complete, he said.
IOC aims to complete a 5 million tonne a year liquefied natural gas terminal at Ennore in the east coast in the third quarter of 2018, Ashok said.
Indian refiners are raising the share of spot crude in their overall crude intake to benefit from changing market dynamics and quickly capture cheap distress and arbitrage barrels.
Ashok said this year IOC will buy 68 percent of its oil needs from term suppliers, down from 80 percent earlier.
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